Clinton to walk tightrope with China amid rows

PHNOM PENH - US Secretary of State Hillary Clinton will meet her Chinese counterpart in Cambodia on Thursday, keen to avoid souring ties amid a fraught background of rows between Beijing and its neighbors.

The US has made a military and economic "pivot" towards Asia in a strategic bid to counteract China's influence in the region, which is home to huge untapped resources and surging economies.

Discussions between Clinton and Chinese Foreign Minister Yang Jiechi at the ASEAN Regional Forum in Phnom Penh come amid a fresh spat over a string of remote islands claimed by Japan and China.

The sudden flare-up of new tensions, sparked by Chinese patrol boats approaching the islands on Wednesday, threatened to overshadow efforts by Southeast Asian nations to agree on a "code of conduct" for disputed waters.

Japan lodged a formal complaint and summoned the Chinese ambassador, while Beijing asserted they "have always been China's territory since ancient times, over which China has indisputable sovereignty".

Japan refers to the islands in the East China Sea as Senkaku and sees a Japanese family as the owners, while China calls them the Diaoyu.

The ten members of Southeast Asian body ASEAN have been attempting to draft a code of conduct for the South China Sea to avert conflicts and create a mechanism for settling disputes.

At the summit, Clinton is likely to try to balance support for US allies Japan, the Philippines and Vietnam -- all angered by China's recent perceived aggression in contested seas -- with efforts to keep Beijing onside, analysts say.

The resource-rich South China Sea, home to vital shipping lanes, is the subject of overlapping claims by Vietnam, the Philippines, Malaysia and others, but is considered almost entirely Chinese by Beijing.

China said it is prepared to discuss a code to boost trust, but it wants to settle territorial disputes bilaterally -- largely because it can bring its huge economic and military clout to bear in negotiations with small neighbours.

A senior US State Department official travelling with Clinton confirmed she will discuss the Japan incident.

The same official told reporters on Monday that the US is "going to be very clear in our determination to see progress on the (South China Sea) code of conduct."

"The entire prosperity of Asia, which is really at the centre of the global economy, rests on the maintenance of peace and stability. So the stakes could not be higher," the official added, requesting anonymity.

Wary of irking China, Clinton will also discuss several less contentious issues with Yang -- such as joint humanitarian response work.

The Philippines is leading a push for ASEAN to unite to persuade China to accept a code of conduct based on a UN law on maritime boundaries that would delineate the areas belonging to each country.

Analysts say the sudden outburst over the East China Sea islands will drive anxious neighbouring countries closer to the United States.

"The Chinese huff and bluff with Japan does not augur well," said Southeast Asia expert Carl Thayer, who runs a consultancy. "China's actions have certainly pushed the Philippines towards Washington," he added.

PHNOM PENH- US Secretary of State Hillary Clinton urged countries around the South China Sea to settle their territorial disputes "without coercion" as she prepared to meet her Chinese counterpart.

Clinton is to sit down with Foreign Minister Yang Jiechi at an Asian security summit in Cambodia, with the top US diplomat keen to avoid souring ties amid a fraught background of rows between Beijing and its neighbours.

The US has made a military and economic "pivot" towards Asia in a strategic bid to counteract China's influence in the region, the main bright spot of the morose global economy and home to huge untapped resources.

Discussions between Clinton and Yang at the ASEAN Regional Forum in Phnom Penh come amid a fresh spat over a string of remote islands claimed by Japan and China.

The sudden flare-up of new tensions, sparked by Chinese patrol boats approaching the islands on Wednesday, threatened to overshadow efforts by Southeast Asian nations to agree on a "code of conduct" for disputed waters.

Nations of the region should "resolve disputes without coercion, without intimidation, without threats, and without use of force", Clinton said in a speech to the summit, according to a text released to the media.

She again urged progress on the long-stalled code of conduct, to avoid "confusion and even confrontation" over shipping and fishing rights in the resource-rich South China Sea.

Japan lodged a formal complaint with China on Wednesday over their island dispute and summoned the Chinese ambassador, while Beijing said they "have always been China's territory since ancient times".

Japan refers to the islands in the East China Sea as Senkaku and sees a Japanese family as the owners, while China calls them the Diaoyu.

Analysts say Clinton is likely to try to balance support for US allies Japan, the Philippines and Vietnam -- all angered by China's recent perceived aggression in contested seas -- with efforts to keep Beijing onside.

The resource-rich South China Sea, home to vital shipping lanes, is the subject of overlapping claims by Vietnam, the Philippines, Malaysia and others, but is considered almost entirely Chinese by Beijing.

China said it is prepared to discuss a limited code of conduct to boost trust, but it wants to settle territorial disputes bilaterally -- largely because it can bring its huge economic clout to bear in negotiations with small neighbours.

In a statement late on Wednesday, it said some Association of Southeast Asian Nations (ASEAN) members had proposed starting discussions about a code, which China saw as being possible only "when conditions are ripe".

The Philippines is leading a push for ASEAN to unite to persuade China to accept a code of conduct based on a UN law on maritime boundaries that would delineate the areas belonging to each country.

Wary of irking China, which has warned against "hyping" problems in the South China Sea, Clinton will also discuss several less contentious issues with her Chinese counterpart -- such as joint humanitarian response work.

She will also raise the spike in tension between Japan and China, an aide to Clinton told AFP.

The islands are covered by a US-Japan security pact dating back to 1960, but Washington is keen to see the issue of ultimate sovereignty resolved "through peaceful means".

Analysts say the unexpected confrontation over the islands in the East China Sea will further spur neighbouring countries anxious about China's rise into the United States' orbit.

"The Chinese huff and bluff with Japan does not augur well," said Southeast Asia expert Carl Thayer, who runs a consultancy. "China's actions have certainly pushed the Philippines towards Washington."
*

If China is doing so well, why do so many Chinese think of moving here?

By Jia Lynn Yang, Nov 16, 2012 10:19 PM EST

The Washington Post Published: November 17

The signs of America’s decline and China’s rise seem to be everywhere: The U.S. middle class is stagnating while China’s continues its meteoric ascent. Our manufacturing sector has been eclipsed by Chinese factories churning out iPhones. The schools in China put ours to shame. It’s only a matter of time before we’re all speaking Chinese.

That’s the American perception, bolstered by the recent presidential campaign.

You won’t hear that kind of talk in China, though.

I recently spent three weeks in Beijing and Dongguan, an industrial city in the south, looking for stories about China’s economy, which is experiencing its slowest growth rate in years. I asked everyday citizens about the real estate market or the manufacturing sector, but in nearly every interview, deep concerns about the future of the country tumbled out, often unprompted.

It’s hard to get ahead these days, people kept saying, no matter how hard you work. The gap between rich and poor is widening. The education system is begging for an overhaul. The government is corrupt and needs massive reform.

This was not the country President Obama and Mitt Romney were talking about on the campaign trail — a giant poised to crush the United States if we don’t stay competitive. Instead, it was a nation wracked with anxieties, some of them strikingly like those of our middle class.

China-watchers know all this and can easily tick off the many problems facing the country at this moment, just as a new generation of leaders assumes power. But average Americans consistently overestimate China’s strength.

Consider this recent Pew Global Attitudessurvey: When asked which country had the world’s leading economy, 41 percent of Americans said it was China, even though China’s economy is one-third the size of ours. Per capita income in the United States is nearly nine times the Chinese figure, which ranks 84th in the world, lower than Azerbaijan, Lebanon and Chile, according to the World Bank.

For their part, many Chinese have put the United States on a pedestal, envisioning a place with better schools, cleaner air and more charismatic leaders. And they are making plans to emigrate here.

Guo Hui, a Beijing resident, invited me into his home to talk about China’s real estate market, but we wound up spending two hours discussing the future of the country and his plans for his family.

Guo’s apartment was sleekly modern, with tall ceilings and children’s toys covering nearly every surface. He and his wife are educated, urban and upper-middle-class — exactly the kind of people you imagine thriving in an ascendant China.

Yet they hope to move to the United States within the next few years. Their 1-year-old son was born here while they were visiting as tourists, and he has an English name, Daniel.

“People like me who have made money by our own efforts — we feel like we can’t make money on our own anymore,” Guo explained as we sat on his floor, watching Daniel toddle around the living room. He made his money in public relations and is an avid stock market investor. Still, he said, “people with contacts with the government can get ahead, but other people cannot.”

A joint survey released in April 2011 by China Merchants Bank and Bain & Co. showed that almost 60 percent of wealthy Chinese were considering emigrating, had begun taking steps to do so or had emigrated already.

The United States is a popular destination, in part because of a program called EB5 that offers visas to people who invest at least $1 million and create at least 10 jobs here. The number of applications from China has jumped nearly ninefold since 2007, up to 2,408 last year.

Guo said that to Americans, the Chinese economy might seem strong because China’s leaders rarely hesitate to prop it up with short-term measures — whether bailing out state-owned companies or building too many bridges.

He offered an analogy to describe the two countries: Imagine two children on a playground. One has parents who are constantly hovering, making sure she doesn’t fall and scrape herself. By contrast, the other child’s parents give her more distance, letting her fend for herself. She stumbles and cries more often, but when she becomes an adult, she’s more resilient.

In Guo’s view, the helicopter parents are the Chinese government, while the other parents represent Washington. In the end, he said, the U.S. economy will be stronger.

There are obvious limits to the analogy — for one, the U.S. government didn’t hesitate to intervene in its own dramatic way after the financial crisis. But Guo’s perspective reflects how many Chinese feel: that despite slower U.S. growth right now, the fundamentals of the nation’s economic and political system are far stronger than China’s.

Indeed, many experts argue that China’s problems are deep and difficult to solve. Its economy in particular faces some potentially wrenching changes as it tries to wean itself from the country’s two biggest engines for growth — exports and state investments in infrastructure — and rely more on consumer consumption.

There’s another problem that won’t be easy to address, and it’s one shared by the United States: income inequality.

China’s Gini coefficient — a widely used barometer for income inequality ranging from 0 to 1, with a higher number indicating more inequality — was 0.438 in 2010, according to the International Institute for Urban Development in Beijing. The American score, by comparison, was 0.469, according to the U.S. Census Bureau. A figure higher than 0.4, some experts say, puts a country at greater risk for social disturbances.

In both countries, inequality has fueled populist anger. While in the United States, resentment is directed at Wall Street, in China the target is the Communist Party. People spoke less to me about wanting a democracy than they did about the abuse of power by their current leaders. Chatter about corruption is a constant theme on Weibo, China’s equivalent of Twitter. Online commenters recently singled out a local official who was flaunting luxury watches that together cost many times what the average Chinese earns in a year.

“If someone is a rich man, you can assume he has a government background,” said Jimmy Wu, founder of a chemical company in Dongguan.

I talked with Wu in his office, together with his friend Gordon Xiao, another local entrepreneur. Business was slow for them because of lower demand from Europe and the United States.

“The only thing that’s doing well is the tea business because businessmen now just sit around drinking tea while they talk about how to survive,” said Wu, whose coffee table was piled high with tea canisters.

"We cannot surpass the United States in the foreseeable future,” said Xiao, who has fashioned himself into a citizen journalist in Dongguan, regularly updating his account on Weibo with stories of local government corruption.

Xiao, who drives a Buick LaCrosse (extremely popular in China), wants to stick it out for now, with the hope that things will change for the better.

But Wu said he wants his son to grow up in the United States, in particular because of the schools. This may surprise Americans used to hearing politicians warn about Chinese educational prowess.

“The nation that educates its children the best will be the nation that leads the global economy in the 21st century,” Obama said in 2010, declaring that the United States is in an “educational arms race” with places like China and India.

The United States does look to be far behind China, according to some measures. Most famously, on a test given to 15-year-olds around the world by the Organization for Economic Co-operation and Development, Chinese students came in No. 1in all three categories: reading, science and math. The United States ranked 14th, 17th and 25th, respectively.

But Yong Zhao, an expert on China’s education system, said the PISA test, as it’s known, is a misleading measurement of the quality of a country’s schools. He said China’s schools don’t do well at teaching creative thinking and encouraging students who might one day found companies.

In the United States, “the glorification of China is rampant,” said Zhao, associate dean for global education at the University of Oregon’s College of Education. Zhao grew up in the Chinese education system and immigrated to the United States after college.

But in China, he said, officials worry about whether the schools can cultivate “the next Steve Jobs,” something that Zhao says is difficult because the curriculum is so test-based.

He said China is in the middle of reforming its education system to look more like — surprise! — the one in the United States. Meanwhile, the United States is increasing standardized testing, a shift that in a way moves this country’s approach closer to China’s.

As China becomes wealthier, more families can afford to send their children to college. People with some college education make up about 9 percent of China’s population, up from 3.6 percent in 2000. By comparison, more than one-third of Americans have some college education.

But in China, in another parallel with the United States, a college degree is no guarantee of success.

For the past few years, there has been a chronic unemployment problem among Chinese college graduates, who often live with their parents to save on housing costs — much like their American counterparts. While China has plenty of low-paying jobs in factories, there isn’t much high-skilled office work.

And now some of those factories have started leaving the country, migrating to lower-wage places such as Laos and Vietnam, which are becoming the “new Chinas” in manufacturing.

China is also in the middle of a massive overhaul of its health-care system, which veered from government-run to completely profit-driven during the free-market reforms of the late 1970s and early 1980s. The government is trying to lower costs and help the system cope with patients suffering from chronic diseases that are expensive to treat, such as diabetes and heart disease. Cancer is also on the rise. (Any of this sound familiar?)

Even as Americans and Chinese sometimes give each other’s countries too much credit, there’s also a sense of unease. In the Pew poll, about a quarter of Chinese said their country’s relationship with the United States is “one of hostility,” compared to only 8 percent in 2010. Nearly two-thirds of Americans now see China as a competitor.

They may be right, but they’re missing the point. The real threat posed by China will come if its leaders fail to solve its domestic problems. A weakened China isn’t good for U.S. firms hoping to grow there, and it’s not good for Chinese reformers who want to nudge their country closer to democracy. Americans are unsettled by the possibility that China’s economy will replace ours as the world’s largest, but if that happens, it will mainly be because of China’s massive population. In many ways, China is still a developing country.

Our eagerness to win a “global competition” only makes sense if we know whom we’re up against. The unstoppable China we’ve come to fear may not come to pass; indeed, it may never have existed.